Starting university in a recession means you earn more

Date

Mon 26 Mar 18

Students who start university when the economy is in bad shape end up with higher pay than those who start during a boom – on average, an extra £1,200 for every working year.

That is the central finding of research by Dr Jacopo Mazza, from our Department of Economics, who worked with researchers from York and the Czech Republic, to study UK Labour Force Survey data from 1998 to 2016.

They compared it to the outcomes for students who started university at different points of the business cycle between 1960 and 2010 and their findings are to be presented to the Royal Economic Society’s annual conference in Brighton (26-29 March).

Previous research shows that graduating during a recession has a long-lasting negative impact on wages. This latest research shows a recession when you start has the opposite effect – boosting the economic potential of graduates.

The researchers conclude that the better outcomes must result from increased effort, with the data providing supporting evidence, revealing that those who enrol when employment is high have above-average grades.

“We think there are three reasons for the increased effort. Firstly higher enrolment in bad economic times leads to higher competition. Secondly when unemployment is high it is more difficult to find a job so students are likely to concentrate more on their studies and thirdly seeing others finding it difficult to get a job may worry students and encourage them to study harder.”

While all three explanations provide plausible justification for the increased effort, none can be directly tested with the data. It remains an open question for future research to determine which of the three factors is the most important.

“Whatever factor leads to better performance and higher wages for those who start higher education in bad economic times, our findings send a clear signal that it is not a good idea to limit funding for education or curb enrolment to universities during a recession,” added Dr Mazza.

Caught in the Cycle: Timing of Enrolment and Labour Market Performance of University Graduates is one of several research papers from the Department of Economics, the Essex Business School and the Institute for Social and Economic Research to be presented to the conference at the University of Sussex.